Bert de Vos is one of the lecturers for the Master in Real Estate. In the Real Estate Valuation course, he addresses all factors that can potentially influence the valuation of an estate. On November 30, he will discuss these factors in his session at the AMS Inspiration Night. Why should you really not miss this? “It’s especially interesting for people in Belgium because many of them have their own home.”
In Belgium, we rarely ask ourselves whether there’s a market for a real estate object. However, this isn’t the case in all cultures, so it’s wise to think about valuation in a somewhat broader and more abstract way. “I visit many unexpected places where real estate is being valued. Usually I don’t really understand how. Why is this house 300,000 euros and another 400,000 euros? What methods do they use?”
Challenges
Justification is key for trust in the sector, but how can you integrate all those influential factors into a mathematical model? You also have to be aware that value and price are two different terms. There are templates available to determine prices, but every valuator uses a different method.
The availability of data is the key here. Data are necessary to apply valuation methods. One problem is that such global data is hard to access in Belgium as everyone shields their information. This can lead to very different valuation reports for the same estate. Home-owners can both win and lose here. But owners aren’t limited to SME-buildings, offices, stores, schools, museums, churches and so on.
Uncertainty factors
All value-determining factors have a certain degree of uncertainty. Let’s take the example of a home with a swimming pool. You’d think that such a home would be worth more because of the swimming pool. If only 10 of the 100 candidates are interested in swimming pools, it becomes an uncertainty factor. Another example is solar panels, which are now taxed. This makes solar panels an uncertainty factor as well.
In short, all value-determining factors have an inherent degree of uncertainty. The more data you have, the more certain you can be about the uncertainty factor. And thus about how accurate your valuation is. Another important factor for valuation is the question ‘who needs the value and why?’ Is a valuation needed to sell your house? For your fire insurance? For inheritance rights? Also, buyers and sellers see rather different values. In a market like this you can only operate by studying methods and exploring their scientific relevance.
Methods
There are broadly three methods for valuing real estate: the comparative method, the price of cost method and the discounted cash flow method. Lots of research has been done on this and there is a wide range of literature available, on which we will elaborate during the Inspiration Night.
During our AMS Inspiration Night on November 30, Bert elaborated on these factors and what it takes to come to a well-founded and professional valuation of real estate. Click the button below to read the report.
